U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16602 / June 20, 2000
SECURITIES AND EXCHANGE COMMISSION v. TIMOTHY J. LYONS, Civil Action No. 98-CV-1471 TW (RBB) (S.D. Cal.)
The Securities and Exchange Commission ("Commission") announced that on June 13, 2000, the Honorable Thomas J. Whelan, United States District Judge for the Southern District of California, entered a final judgment of permanent injunction and other relief against Timothy J. Lyons ("Lyons"), a resident of Scottsdale, Arizona, and a former trader and portfolio manager at two registered investment adviser firms. Following the entry of judgment, the Commission instituted and settled an administrative proceeding against Lyons, which barred him from associating with any investment adviser.
The Commission's Complaint alleged Lyons failed to disclose his conflict of interest in fraudulently allocating $929,601.30 in profitable equity day trades (buying and selling the same security within the same day) to his personal accounts at the expense of client accounts. The Commission alleged that these violations occurred from 1991 through 1995, while Lyons was employed at two investment adviser firms, Nicholas-Applegate Capital Management ("Nicholas-Applegate") and Lyons Capital Management. Additionally, the Complaint alleged that Lyons aided and abetted books and records violations of Nicholas-Applegate by failing to report completely and accurately his personal trading to that firm. The judgment permanently enjoins Lyons from violating the antifraud provisions of the federal securities laws and from aiding and abetting the record keeping provisions of the federal securities laws. The judgment also orders Lyons to disgorge his ill-gotten gains of $929,601.30, with prejudgment interest, but waives payment of all but $24,000 of that amount based on Lyons' demonstrated inability to pay.
Lyons, without admitting or denying the allegations in the complaint or the findings in the administrative bar order, consented to entry of (1) a judgment permanently enjoining him from future violations of the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1) and 206(2) of the Investment Advisers Act, and from aiding and abetting violations of the books and records provisions of Section 204 of the Advisers Act and Rule 204-2(a)(12) thereunder, and requiring the above disgorgement; and (2) a Commission order barring him from association with any investment adviser.
In a related matter in August 1998, the Commission instituted and settled a cease-and-desist and administrative proceeding against Nicholas-Applegate in which Nicholas-Applegate consented to the entry of an Order, without admitting or denying the Commission's findings, that it pay a civil penalty of $250,000 and cease and desist from committing or causing violations and any future violations of the books and records provisions of the Investment Advisers Act of 1940 ("Advisers Act"). (In the Matter of Nicholas-Applegate Capital Management, a California Limited Partnership, Investment Advisers Act of 1940,
Release No. 1741; Administrative Proceeding File No. 3-9673). In addition, Nicholas-Applegate was censured and agreed to maintain and implement procedures reasonably designed to supervise its employees with a view toward preventing and detecting violations of the books and records provisions of the Advisers Act. For further information see LR-15842 (August 12, 1998).